Accenture (ACN) has raised its dividend every year since it began paying one in 2005, recording annualized dividend growth en excess of 20% during that time period.
With healthy payout ratios, excellent free cash flow generation, a clean balance sheet, and proven durability, Accenture is well-positioned to continue rewarding shareholders with strong dividend growth in the years ahead.
Furthermore, while the continued rise of the digital age is creating challenges for many companies, Accenture stands to be a beneficiary of many of these trends.
Let’s take a closer look at Accenture to see if this dividend growth stock looks attractive today.
Business Overview
Accenture is one of the largest professional services companies in the world and provides a range of end-to-end services and solutions in strategy, consulting, digital technology, and operations. Accenture develops and implements technology solutions to improve its clients’ productivity and efficiency.
The company was started in the 1950s and now serves more than 40 industries, delivering virtually every business function needed by its customers.
Accenture’s clients include 94 of the Fortune Global 100 and over 75% of the Fortune Global 500. Approximately 54% of Accenture’s revenue is generated from consulting with the remaining 46% from outsourcing activities.
By geography, North America is the company’s largest region and accounts for 48% of total revenue. Europe generates another 35% of revenue, and the remaining 17% is from growth markets such as Brazil.
By operating group, Accenture generates 26% of its sales from Products (consumer goods, retail, travel services, industrial, life sciences); 21% from Financial Services (banking, capital markets, insurance); 20% from Communications, Media & Tech; 18% from Health & Public Service; and 15% from Resources (chemicals, energy, utilities, natural resources).
Business Analysis
Accenture’s competitive advantages begin with its long operating history, wide range of services, and focus on developing its people.
The company has been in business for more than 60 years, which has given it the time needed to establish long-lasting customer relationships and build out its portfolio of skills and services.
The longer Accenture works with a client, the more ingrained it becomes in the client’s business processes and key strategic issues. As a result, switching costs are created that help with client retention.
For example, 98 of the firm’s top 100 clients have worked with Accenture for at least 10 years. The firm was a part of Forbes’ top global brands’ list for the sixth consecutive year and was also one of the top 25 companies on the Barron’s 500 list for the second year in a row.
Few companies can match the breadth and reach of Accenture’s services, which is a requirement to serve large multinational clients. The company has offices in 55 countries around the world and is able to deliver end-to-end solutions virtually anywhere.
Accenture delivers its services through around a dozen focused industry groups and consistently acquires smaller rivals to round out its services. The company has invested about $3.4 billion in nearly 70 acquisitions over its last three fiscal years (including $1.7 billion in fiscal 2017 itself) to enhance its skills and gain scale in key growth areas such as digital.
Some of its recent acquisitions include Cloud Sherpas, a leading cloud advisory and services provider; IMJ Corporation, one of Japan’s largest digital marketing agencies; and several European digital services companies.
As the pace of technological advancements accelerates, Accenture is becoming an even more important partner for its clients because it helps them be the digital disruptors rather than the disrupted.
From 3D printing, cloud computing, data analytics, artificial intelligence, and security to virtual reality and robotics, Accenture plays a leading role in helping its clients go more digital with their products and services.
